DC4MS

Disney's Next Stop?

By Rick Aristotle Munarriz October 4, 2007

Disney's Next Stop?

Did you hear about Disney (NYSE: DIS) entering the destination club market?

Probably not, since I just made it up. Still, it wouldn't surprise me to see the family entertainment giant move into the upper echelon of travel clubs in a few years, the same way it joined other hospitality heavyweights like Hilton (NYSE: HLT), Starwood (NYSE: HOT), and Marriott (NYSE: MAR) in the more mainstream time-share market.

What's a destination club? Glad you asked. Unlike time-share operators that build out resorts with hundreds of units, destination clubs purchase homes and condominiums -- often in the multimillion-dollar range -- and then offer them up for member vacations.

The destination club's allure rests in having a portfolio of several properties -- on beaches, golf courses, snow-blessed slopes, and metropolitan hotspots -- to give members the ultimate in pampered experiences.

Sure, time-share members can join exchange programs like IAC/InterActiveCorp's (Nasdaq: IACI) Interval International to swap out weeks with other properties. And with Disney about to break ground in Hawaii for an 800-unit resort in Oahu, its Disney Vacation Club will be a great one-stop shop for time-share fans who want to stay at Disney's theme parks or its existing beachfront properties in Vero Beach, Myrtle Beach, and Oahu in a few years.

Disney has never shied away from the premium travel market. Staying at its theme-park resorts will set you back more than staying at a nearby hotel. Setting sail on a Disney cruise is usually pricier than a similar itinerary on a Carnival (NYSE: CCL) or Royal Caribbean (NYSE: RCL) ship. Disney even recently began pitching Adventures by Disney, a collection of guided sightseeing vacations around the world.

So isn't it just a matter of time before Disney comes out with Disney Escapes, catering to families smitten by the Disney brand, but looking for a more exclusive experience? Destination clubs cater to affluent families, typically providing homes with 4-6 bedrooms and private swimming pools. Sure, rich couples and solo corporate travelers join destination clubs, but they can be equally served by a hotel's penthouse suite or a Bora Bora hut on stilts. These clubs get their real bread and butter from families -- and extended families -- who want to travel together. Isn't that what Disney is all about?

Luckily for Disney, the market is still in its infancy. There are only about 5,000 destination-club members, according to industry watcher Helium Report, in a fragmented industry with roughly two dozen clubs. Consolidation is a given, and Disney can probably snap up a market leader and brush up on the market as it upsells its destination-club offerings to higher-end Disney Vacation Club members.

It's inevitable, really. Now it's just a question of whether Disney is bold enough to make the first step, or simply lets its hotel mogul rivals beat it to the rum punch.